Grandma Never Had It So Good

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Thanks to zoning laws in Portland, Ore., that encourage putting a second living space on a single-family lot, Bryan Scott, 37, and Jen Wantland, 40, were able to transform their 480-square-foot garage into a home and rent out their four-bedroom house — an arrangement that pays for all their living expenses, and then some.

In most cities, adding a second house to a single-family lot would be illegal or would set off an epic battle with the neighbors that could drag on for years. But not in Portland, Ore.

There, this kind of housing — referred to officially as “accessory dwelling units,” but better known as granny flats, garage apartments or alley houses — is being welcomed and even encouraged, thanks to friendly zoning laws. And additional living spaces are springing up everywhere, providing affordable housing without changing the feeling or texture of established neighborhoods the way high-rise developments can.

In the southeastern part of town, Jen Wantland, 40, and Bryan Scott, 37, converted their two-car garage into a 480-square-foot home using mostly salvaged materials, for about $60,000. Then they moved in and rented out their four-bedroom house, which more than covers their living expenses. They’re delighted to talk about how fabulous downsizing feels and how it allows them to work less and play more.

Stephanie and Sam Dyer, who are both 34 and live in the coveted Boise neighborhood, built a 342-square-foot version of their bungalow so their parents could have somewhere to stay when they visit. The rest of the time, the couple have been steadily recouping their $110,000 investment by renting out the little house through sites like Airbnb and VRBO.

Lenore Prato, 45, worried that she would be the first member of her large Italian family unable to provide a home for her parents as they got older. So Ms. Prato and her husband, Ken Finney, 44, built a 660-square-foot cottage that sits behind their own house on a corner lot in the Sunnyside neighborhood.

“I like that we’re setting an example for our kids,” Ms. Prato said. “This is how you treat your parents.”

They are also setting a good fiscal example. Eric Engstrom, a principal city planner, has seen these small structures become increasingly popular during his 16 years working for the city. And as he put it, “Given the low vacancy rate, when they’re done, you can rent them out in about an hour.” Which means that adding an accessory dwelling unit, or A.D.U., increases the value of a piece of property.

Since the 1990s, Mr. Engstrom said, zoning laws in Portland have been slowly changing to accommodate the buildings. “There’s been a lot of pressure on us to allow them,” he said.

But it was in 2010 when the biggest changes took place. That was when the city relaxed the limitations on size and began offering the equivalent of a cash incentive by waiving the hefty fees usually levied on new development. Other cities in the Northwest have been moving in this direction, but Portland is the first to offer a significant financial benefit and one of the few that does not require owners to live on the site, provide additional off-street parking or secure the approval of their neighbors — all of which have proved to be obstacles elsewhere. Apart from Santa Cruz, Calif., and Austin, Tex., where secondary dwellings have long been allowed, Portland is alone in this country in its aggressive advocacy of the units.

Eli Spevak, a local alternative-housing developer who is among those who lobbied for A.D.U.-friendly policies, said, “The city changed two rules, and all of a sudden it went from 30 a year being built to 200 last year” — an impressive figure, considering the total number of applications approved for single-family houses in 2013 was 800.

“That’s amazing,” he said. “The environmental benefit of building small is huge, and this is such a wonderfully flexible housing type.”

Over on the corner of 29th and Going, in the Alberta Arts neighborhood, Kyra Routon-Michelinie and James Michelinie spent what felt like an endless series of weekends last year constructing a small house behind their three-bedroom bungalow.

Ms. Routon-Michelinie, a 29-year-old speech pathologist, and Mr. Michelinie, a 30-year-old biomedical engineer, are renting out the big house for now and living in the little one, which was designed by her father, Steven Routon, an architect. It has such an animated street presence, they say, that passers-by often stop to chat about it.

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A 480-square-foot garage, now a home: one of many small dwellings encouraged by the city of Portland, Ore.CreditLaure Joliet for The New York Times

The 700-square-foot house cost about $100,000 to build, not counting the labor supplied by the couple and her parents.

The city also pitched in by waiving development fees. That alone saved them $14,000 — money they didn’t have. Mr. Michelinie said, “Without that, we may never have started the project.”

Still, securing financing was a problem, as most lending institutions are not up on this trend.

“The only reason there aren’t 10,000 A.D.U.s being built is that nobody can find the money,” Mr. Michelinie said.

Their 2,000-square-foot home, which they bought for $312,000 in 2012, didn’t offer sufficient equity, he said, so they borrowed from relatives.

Once the two houses were standing side by side on the 40-by-100-foot lot, everyone was worried about the appraisal, but it came in at $500,000 — substantially more than they had spent — so they were able to refinance their existing mortgage, in effect securing a loan after the fact. Rent from the main house now pays the mortgage on both places.

When they have children, the couple plan to move back into the main house, and Ms. Routon-Michelinie’s parents, who live outside the city, will use the smaller house as a pied-à-terre.

“I can’t wait to live there,” Mr. Routon said.

Of course, the challenge with houses this small, said Jack Barnes, a local architect with A.D.U. experience, is “figuring out how to fit everything.” It’s a little like designing the inside of a boat, he said.

The maximum allowable size is 800 square feet, or 75 percent of the overall square footage of a lot’s primary house, whichever is smaller.

Despite the size limitation, costs can easily run to as much as $250,000, depending on the design and the finishes, although the average accessory unit, according to a survey sponsored by the state Department of Environmental Quality of 860 built in Portland, Ashland and Eugene, is about 668 square feet and costs a little over $80,000.

A library of case studies detailing design choices and the attendant costs can be found on accessorydwellings.org, a site developed by three passionate advocates: Mr. Spevak, the developer, who is spending this year as a Harvard Loeb fellow, working on new ways to finance the units; Martin Brown, an environmental researcher who built a purple A.D.U. that now houses his mother-in-law; and Kol Peterson, a web manager for the Forest Service, who shares an 800-square-foot unit with his wife and teaches an introductory A.D.U. course. (The $125 class, “Building an Accessory Dwelling Unit on Your Property in Portland, Oregon,” which is held every month or so, is nearly always sold out, he said.)

The site offers a calculator for estimating how long it will take to break even on your investment. In his case, Mr. Peterson said, it was about two and a half years.

But affordability is only part of the appeal of accessory dwelling units.

Jordan Palmeri, an engineer with the Oregon Department of Environmental Quality, said he had analyzed a lot of data related to their sustainability. And “the relative benefits of reducing home size were so much greater than other programs being incentivized,” he said.

“In Oregon, the average new homes are 2,200 square feet,” he continued. Some 20 to 30 percent of the state’s landfill waste comes from the associated construction debris and from that of teardowns and renovations.

An article last Thursday about new zoning laws in Portland, Ore., meant to encourage small backyard houses misstated the name of a course on building such houses. It is “Building an Accessory Dwelling Unit on Your Property in Portland, Oregon” — not “This Is the Little Life,” which is a website on small backyard house. The article also misstated the surname of a woman who converted a a garage into a home. She is Jen Wantland, not Wetland.